Customs, Excise and Gold Tribunal - Delhi
Voltas Limited vs Commissioner Of Central Excise, Guntur on 5 June, 2002
Equivalent citations: 2002ECR359(TRI.-DELHI), 2002(144)ELT108(TRI-DEL)
ORDER
G.R. Sharma, Member (T).
1. M/s. Voltas Limited have filed this appeal being aggrieved by the impugned order passed by the Collector of Central Excise, Guntur confirming demand of duty amounting to Rs. 24,150/- and imposing a penalty of Rs. 6,000/-.
2. The facts of the case briefly stated are that the appellants are engaged in the manufacture of various types of air-conditioning and refrigerating machinery. The appellants entered into a contract with M/s. Nagarjuna Fertilizers and Chemicals Ltd. (NFCL) on 31-7-89 for air-conditioning of their project site. The contract involved the supply of equipment and other services such as design, engineering of air-conditioning plant, erection, testing and commissioning of the plant. They utilized the compressors condensers, chillers manufactured by them at its Thane Factory in the execution of the contract together with bought out item. The items of machinery from Thane Factory were cleared on payment of appropriate excise duty.
3. The show cause notice issued to the appellants alleged that the appellants had fabricated and erected at the site of NFCL GI Ducts of 1000 Sq. Metres valued at Rs. 1,40,000/- falling under Chapter Sub-Heading No. 7326.90 of the Central Excise Tariff Act, 1985 and without obtaining licence as required under Central Excise law and removed the same without payment of central excise duty and thus contravening provisions of various rules of Central Excise Rules. Therefore, they were asked to explain as to why duty amounting to Rs. 24,150/- should not be demanded from them and why penalty should not be imposed. It was also alleged that the clearance of the ducts was done by suppressing the fact from the Excise Department and hence a notice was issued under the proviso to Sub-section (1) of Section 11A of the Act. In reply to the show cause notice appellants submitted that no excisable product known as ducts comes into existence which can be bought and sold in the market; that the ducting is a system of air distribution and it differs from contract to contract and is fabricated at site depending upon design and drawing specific to that contract; that it becomes a part and parcel of the air-conditioning plant and as such is not in the nature of goods and is not movable property. It was also submitted that the appellant is not the manufacturer of ducts and since the contractor M/s. Syed Hussain and Sons were appointed to fabricate the duct at site, the liability of duty, if any, on the alleged manufacture of ducts should rest with M/s. Syed Hussain & Sons. Appellants also challenged the invocation of proviso to Section 11A on the ground that there was no suppression of facts and no wilful evasion of excise duty. Submissions were made during personal hearing also. After hearing the appellant, learned Collector passed the order confirming demand of duty and imposing penalty.
4. Arguing the case for the appellant(s) Shri A.N. Haksar, Senior Counsel submits that their case was squarely covered by the decision of the Tribunal in the case of the appellants themselves by the Tribunal's Final Order No. 1301/2001, dated 8-8-2001 [2002 (139) E.L.T. 223 (T)]. Learned Sr. Counsel, further submits that the Tribunal settled the matter in the case of the appellant and M/s. Syed Hussain holding by Final Order No. 1513/1996, dated 6-8-96 upholding the Commissioner (Appeals) order and dismissing the appeal by recording the finding in Para 3 of the above order which is follows :
"3. We have perused the appeal grounds as well as the impugned order. It is now seen that the transaction between the respondents and M/s. Syed Hussain & Sons is on principal to principal basis. The Department has not brought in any evidence to show that M/s, Syed Hussain & Sons has a labour contract with the respondent. In the absence of the same it is seen that when the goods are manufactured by M/s. Syed Hussain & Sons, they are to be held as the real manufacturers. This position of law is now well settled in view of the decision of the Hon'ble Supreme Court in the C.C.E., Baroda v. MM. Khambhatwala, reported in [1996 (84) E.L.T. 161]. In this particular case it is also noticed that M/s. Syed Hussain & Sons are manufacturing these G.I. Ducts etc. with the help of their own machinery, which further strengthens the plea of the respondents that they are not the actual manufacturers. In this premises we find no merit in the appeal of the Department and the same is accordingly dismissed."
He therefore, prays that appeal may be allowed.
5. Ms. Ananya Ray, learned SDR appearing for Revenue submits that two issues are involved in this appeal. The first issue was whether air-conditioning ducts, which come into existence, are excisable and the second issue is whether Voltas are manufacturer of the said product. She submits that on merits the case has not been contested. Since it is covered against the unit by the Tribunal's decision in Blue Star reported in [1999 (107) E.L.T. 609]. On the issue whether M/s. Voltas are the manufacturer or M/s. Syed Hussain to whom they had given the work of fabrication etc.; that the contention of the appellant is that this issue is already settled in their favour under Tribunal's Order Nos. 1513/96, dated 6-8-96 and 1301/2001, dated 8-8-2001 [2002 (139) E.L.T. 223 (T)] wherein it has been held that the relationship between Voltas and sub-contractor is on principal to principal basis and not that of hired labourer and hence the sub-contractor was to be held as the manufacturer.
6. She also submits that facts in the present appeal are entirely different inasmuch as the earlier two contracts were covered by two different contracts; that each contract binds the party only to the extent of the condition of that contract and not to any previous or succeeding contract. It was, therefore, contended by the learned SDR that it would not be correct to hold that the decision in the earlier cases which pertains to separate and different contract will hold good in the present case; that in the present case the appellant clearly stated that M/s. Syed Hussain & Sons is a sub-contractor/job worker who fabricated duct by use of sheet given to them by the appellant; that appellant paid labour charges for the same and also the price for certain angle fastened and other bought out equipment. Learned SDR submits that in spite of the promise to produce the copies of the said contract between the appellant and M/s. Syed Hussain & Sons they failed to do so; that the appellants admitted themselves that they were paying only labour charges to M/s. Syed Hussain; that this contention has been supported by invoices produced by the appellant. Learned SDR submits that M/s. Syed Hussain &. Sons was merely hired labourer and the relationship between them was not on principal to principal basis. In support of this contention she cited and relied upon the decision of this Tribunal in the case of Maruti Udyog Ltd. reported in [2001 (134) E.L.T. 188]. She submits that the conclusion was based on the fact that M/s. Maruti Udyog Ltd. supplied all the raw material for fabrication etc.; that M/s. Maruti Udyog Ltd. made available to the fabricator the machine etc. without any charges and M/s. Maruti Udyog Ltd. also supervised the work. It was contended that in the present case the relationship between Voltas and M/s. Syed Hussain was similar inasmuch as M/s. Syed Hussain fabricated the ducts at site after being entered into contract with Voltas for fabrication of the air-conditioning plant; that Syed Hussain did not have any factory or manufacturing unit; that the manufacturing unit of M/s. Voltas was used by M/s. Syed Hussain; that M/s. Syed Hussain fabricated the duct with the material given by M/s Voltas Ltd.
7. On limitation learned DR submits that she relies upon the following decisions:
(i) 1999 (114) E.L.T. 429 (LB-T) - Nizam Sugar Factory Ltd. v. C.C.E., Hyderabad.
(ii) 2002 (48) RLT 456 (T) Para 4 - Orissa Bridge Corporation v. C.C.E., Bhubaneswar.
(iii) 2000 (122) E.L.T. 891 (T) - Agrico Engg. Works (India) Pvt. ltd. v. C.C.E., Meerut Para 11.
8. Regarding reliance on the ratio of the judgment of the Supreme Court in the case of M/s. M.M. Khambhatwala reported in [1996 (84) E.L.T. 161] learned DR submits that this decision has been distinguished in the case of Maruti Udyog Ltd. and therefore, covers the present case squarely. Learned DR. therefore, prays that appeal may be rejected.
9. We have heard the rival submissions. We have also perused the evidence on record as also the case law. In so far as the formulation of the issues is concerned we note that on merits whether the air-conditioning ducts which come into existence are excisable or not. We note that this issue is covered against the appellant by the Tribunal's decision in the case of Blue Star cited above and therefore, was not contested also.
10. Regarding the applicability of the earlier decisions in the appellant's own case. We note that Revenue has contended that each contract is a separate one. In support of this contention they have stated that the admitted position was that ducting differs from contract to contract and is fabricated at sites depending upon the designs and drawings specific to that contract. As against this the contention of the appellant is that M/s. Syed Hussain carried out the fabrication at the site and since this fabrication is for purpose of air-conditioning or refrigeration, therefore, the dimension of various items may differ but that does not mean that simply because the contracts are different one is hired labour contract and the other not. In the instant case, we note that M/s. Voltas Ltd. entered into Price Agreement Contract for Ducting and Allied Works on 7-12-92. Paras 3.6 to 3.10 are reproduced as under :
"3.6. The rates mentioned above are for bottom duct height of 15'. If the bottom of duct exceeds 15' from the floor level, special prices will be negotiated.
3.7. If you are advised to use anchor fasteners for duct supports, you will use anchor fasteners of dimension 8 mm with an angle piece of 2", for which we shall pay you Rs. 15/- per anchor fasteners extra, including drilling and fixing.
3.8. The above-mentioned prices are exclusive of works contract tax. If works contract tax becomes leviable, the same will be charged as applicable on material cost.
3.9. The number of trips assumed for ducting involving 2000 sq. ft. or less, is 2. If for no fault of yours, you are forced to make more than 2 trips we shall compensate additional expense at actuals.
3.10. If for no reason you use 8 mm rods instead of 10 mm we shall be deducting Rs. 0.20 per sq. ft. from the prices granted to you."
11. It has been stated that special prices will be negotiated if the price differs. In Para 4.3 it has been stated that -
"4.3. If you have to procure the angles from Secunderabad and the same are to be transported to outstation jobs; in such situation we shall pay you the actual transportation, from Secunderabad to the job site as outstation allowance."
12. Further in Para 6.2 it has been stated that -
"6.2. You will complete the work as per the stipulated time limit given by us. In case there is any delay on your part, we reserve the right to impose penalty on you."
13. All the above shows that the contract is not a contract of hired labour or labour contract. Moreover, the penalty provision clearly brings out that it is not a case of hired labour contract. Thus, we find that though contract may differ yet it does not mean that the present contract is a contract of hired labour or M/s. Syed Hussain is a hired labour of M/s. Voltas Ltd.
14. It was also contended for Revenue that the appellant paid labour charges for the services to M/s. Syed Hussain and also the prices for certain angle fastened and other bought out equipments. The payment of labour charges or price of certain items do not make a contract as a labour contract. Thus we find that the contract between M/s. Voltas Ltd. and Syed Hussain is not a contract for labour but is a normal contract and that M/s. Syed Hussain in view of the stipulations in the price contract are not hired labour.
16. It was also contended for Revenue that the ratio of the judgment of the Tribunal in the case of Maruti Udyog Ltd. V. CCE, Delhi reported in [2001 (134) E.L.T. 188] is applicable inasmuch as M/s. Voltas Ltd. supplied all the raw material, M/s. Voltas made available all the machines etc. to M/s. Syed Hussain and supervised the work. However, from the records, we find that M/s. Voltas supplied most of the item but also paid prices for certain angle fastened and other bought out items to M/s. Syed Hussain. We also note that in Para 8 of reply to show cause notice it has been stated -
"We submit that in execution of the aforesaid contract with NFCL, we utilize our own manufactured equipment such as condensers, chillers, compressors etc. The contention of Revenue was that manufacturing equipment was supplied by M/s. Voltas whereas we find that it is the manufactured equipment and not manufacturing machines which were supplied by M/s. Voltas".
17. In Para 7.1 of Order-in-Original it has been stated that NFCL ceased to be a manufacturer by giving work order to M/s. Voltas Ltd. If this finding is accepted then nothing prevents the assessee to say that work order was given to M/s. Syed Hussain and therefore, Voltas ceased to be manufacturer."
18. Having regard to the above discussion, we hold that M/s. Syed Hussain is not a hired labour or covered by the labour contract only. The fact is that M/s. Syed Hussain fabricated the ducts. The above findings also bring out that the contract between the two is not a contract of labour alone but a contract between two parties at arm's length and as on principal to principal basis. We also note that M/s, Syed Hussain were not using the manufacturing equipment of M/s. Voltas Ltd. but were using the manufactured items of M/s Voltas Ltd. as also some of their own items for which they were being paid for the items supplied by them and there was a penalty clause if the work was not completed within time. Having regard to the above, we hold that M/s. Voltas Ltd. is not the manufacturer, but the manufacturer is M/s. Syed Hussain.
19. Since on merits itself the issue is decided in favour of M/s. Voltas Ltd., we do not consider it necessary to examine the limitation aspect.
20. The appeal filed by M/s. Voltas Ltd is allowed in the above terms.